Analysts: Recent Automotive Job Cuts Are Just the Beginning

Over the last six months, automakers have announced roughly 38,000 job cuts as part of global restructuring efforts. While such things are typically part of the normal ebb and flow of the industry, the ebb could be a prolonged one as manufacturers seek ways to mitigate the high cost of tech and figure out what their businesses should look like in the 21st century.

A litany of other issues are impacting jobs. China’s economy turned out to be less stable than presumed, trade tensions have escalated in practically every major market that builds cars, and most of the developed world appears to be nearly tapped out in terms of sales growth.

As a result, analysts are growing concerned that the layoffs we’ve seen thus far are just the beginning. But they’re not the only ones. Industry insiders are also willing to admit that times are changing — and rather drastically.

Bloomberg, which has tabulated scheduled layoffs since late last year, did the same for the comments of industry experts attempting to forecast tomorrow. The prognosis could be better.

Let’s start with Ford. Careful not to announce layoffs in lump sums, the manufacturer has promised a 7,000 global staffing reduction as part of its cost-cutting goals. While most of those have been in Europe, with more reported to come focusing on Germany and Ford’s joint operations in China, analyst Adam Jonas of Morgan Stanley said that won’t be nearly enough to reach the stated profit goals of “Smart Redesign.”

“Auto companies globally are contemplating life where global production has greater downside risk than upside,” Jonas wrote in a report on Tuesday. “Ford disclosed that the 7k headcount cuts will save $600 million annually, or an average of $86k per worker … [our calculations] require more than a further 23k salaried headcount reductions.”

For what it’s worth, Ford says it’s doing more than just trying to promote financial fitness amid trying times. It’s changing as a business by moving into electrification, data, mobility services, and all that other tech crap the industry can’t seem to get away from. But it would be unfair to single out the Blue Oval, as most large automakers are doing the same thing to varying degrees.

Daimler’s departing CEO, Dieter Zetsche, said as much while handing over the corporate reins to Ola Källenius this week. “Everything is under scrutiny,” he told shareholders in Berlin on Wednesday. “We cannot and will not be satisfied with the current level of profitability.”

The company has yet to confirm anything, though reports out of Germany claim Daimler could reduce its own headcount by as many as 10,000 employees, and soon. Meanwhile, executives are stressing the importance of improving financial efficiencies.

Dr. Z cited all the usual culprits, specifically the high development cost of new technologies and the fleshing out of Mercedes’ product range, but added that the entire industry is going through a period of change. He said it was up to automakers to prove the change was viable and that electric vehicles must be made profitable to show investors that their money is not ill-placed.

Again, easier said than done. Tesla, for all of its success, has had one hell of a time making EVs work for its bottom line. Its share price has tumbled through 2019. Demand is also down, leading some to believe that this could be a very bad year for the company. However, it’s not just Tesla that needs to worry about sales.

Bank of America Merrill Lynch analyst John Murphy said he believes the entire industry is headed for a “significant downturn,” adding that China’s lackluster performance as a market is leaving many automakers scratching their heads. But, once they’ve stopped, their next move could be issuing more pink slips — as there likely won’t be enough cash leftover to pay for mobility projects, R&D, and non-essential employees.

[Image: Daimler AG]